May 2013

In the trading room today: What’s Next for the BoE and the GBP? In the aftermath of the U.K. inflation report, we focus on the GBP and ponder the next move by the Bank of England and how its monetary policy would impact the future trend direction of the pound sterling, we analyze the renewed weakness of the GBP as the GBP/USD currency pair tests an important support level, we take a look at the USD/JPY pair ahead of the Bank of Japan interest rate announcement, we follow up on our EUR/USD trade alert, we highlight the market’s reaction to Bundesbank’s monthly report, the new statement by the Japanese economy minister, and the U.K. CPI, we discuss new forecasts from Bank of New York-Mellon and Royal Bank of Scotland, and prepare for the trading session ahead.


USA 

Bundesbank warning over slipping deficit targets. Vodafone: ‘Severe’ economic weakness in Southern Europe. Parliamentary Committee approves plan to bail-in large depositors. UK inflation falls more than expected to 2.4% y/y in April from 2.8%…

 


Powered by Guardian.co.ukThis article titled “Eurozone crisis as it happened: Italian PM warns EU could ‘implode’ without action on growth and jobs” was written by Graeme Wearden and Nick Fletcher, for theguardian.com on Tuesday 21st May 2013 17.21 UTC

6.21pm BST

Protests over Papandreou’s talk on Greek crisis

Over in Greece, there is much ado over former prime minister George Papandreou giving a talk on the crisis that has rocked the country at an upcoming Ted X convention in Edinburgh. Helena Smith in Athens says:

On hearing of the politician’s participation in a panel entitled “moments of truth,” outraged Greeks (for although they are anonymous that is what the protestors are presumed to be) immediately launched a protest campaign that has already drawn thousands of signatories. 

“George Papandreou lead Greece into the embrace of the IMF … and [with it] into a deep humanitarian crisis,” said the protestors in a statement that referred to the galloping unemployment, poverty and unprecedented number of suicides that stewardship under the IMF has also unleashed. “At the same time Papandreou continues to support the neo-liberal policies that drove the country to its present plight while he travels in luxury around the world giving lectures on the lessons he has learned from the Greek crisis.”

This is not the first time that Papandreou has been openly criticised for capitalising on the crisis – the politician’s decision give a course about his experience at Harvard university’s JFK school last year sparked similar anger. But it is the first time that protestors have taken to the internet to vent their spleen – with the pressure now mounting (2824 signatures had been gathered by this afternoon) it remains to be seen whether he will be forced to pull out of the conference.

Chief executive of Russian energy company Gazprom, Alexey Miller (L), leaves the Maximos mansion after a meeting with Greek prime minister Antonis Samaras. Photograph: EPA/Alexandros Vlachos
Chief executive of Russian energy company Gazprom, Alexey Miller (L), leaves the Maximos mansion after a meeting with Greek prime minister Antonis Samaras. Photograph: EPA/Alexandros Vlachos

Meanwhile Papandreou's arch rival — Greece's current prime minister Antonis Samaras, has spent the afternoon in talks with the head of Gazprom as the country attempts to expedite it’s much-delayed privatisation drive. 

This is the third time since March that Gazprom chief Alexei Miller has flown into Athens for talks. The Russians have made no secret of the fact that they want to buy Despa, the Greek natural gas company long seen as a jewel in the crown of Greece’s privatisation program which protestors say is yet another humiliation the country is being forced to endure as a result of IMF intervention.

And on that note, it's time to close up for the day. Thanks for all the comments, and we'll be back tomorrow.

5.13pm BST

European markets end on strong note

European markets made a positive finish to the day, boosted by comments from Federal Reserve member James Bullard suggesting there would not be an early end to the central bank's bond buying programme.

The FTSE 100 finished up 48.24 points at 6803.87, its highest finish since its record close on 30 December 1999

• Germany's Dax rose 0.19% to 8472.2, reversing an early fall

• France's Cac closed 0.33% higher at 4036.18

• But Italy's FTSE MIB fell 0.45% although it was well off its lows

• Spain's Ibex ended 0.6% lower

The Dow Jones Industrial Average is currently 48 points or 0.32% higher.

4.36pm BST

Fed’s Bullard says bond buying should continue

Recent comments from US Federal Reserve members seemed to suggest a tapering off of its bond buying programme.

But James Bullard, president of St Louis Federal Reserve Bank, said the centrel bank should keep buying bonds, while adjusting the pace depending on economic conditions.

And in a speech to the Goethe University in Frankfurt, he said the ECB should consider asset purchases if inflation fell further. He said, as reported by Reuters:

Quantitative easing is closest to standard monetary policy [once interest rates get near zero], involves clear action and has been effective.

3.23pm BST

Germany and Spain agree deal to combat youth unemployment

Still with unemployment, one of the biggest issues facing the eurozone (and indeed elsewhere), Germany has agreed a deal to help reduce youth unemployment in Spain.

Under the terms of the agreement between the two countries, Germany will create 5,000 jobs a year for young Spanish workers. El Pais reports:

A memorandum of understanding in this area was signed Tuesday in Madrid by Spanish Labor Minister Fátima Báñez and her German counterpart Ursula Von der Leyen. It includes work combined with professional training and stable posts for qualified workers.

Báñez welcomed Germany’s “commitment” toward helping young Spaniards, adding that the accord would provide “many opportunities for many young Spanish people which today, because of the crisis they do not have in Spain, and which, however, they can have in other European Union countries on a temporary basis.”

The accord calls for the interchange of workers and cooperation in the area of labor affairs. There are currently 43,548 Spaniards affiliated with the German Social Security system, and 37,797 Germans in the Spanish system.

Both countries also agreed to work together on initiatives at the EU level to reduce youth unemployment. “This cooperation between Spain and Germany will very soon show itself in additional joint measures that will make a better life for our young people possible,” the two countries said in a statement

3.19pm BST

Samaras hopes to attract outside investment to tackle jobless crisis

Greek prime minister Antonis Samara said his recent trips to China and Azerbaijan would help attract outside investment into the country and combat its chronic unemployment problem.

According to a report by ekathimerini, Samaras said after a meeting with Greek president Karolos Papoulias in Athens:

We have consolidated Greece’s position in Europe and now we are consolidating it on a global level.

He said unemployment, which reached a record 27% in February was “the country’s biggest problem.”

Greek prime minister Antonis Samaras after his meeting with Greek president Karolos Papoulias. Photograph: AP Photo/Petros Giannakouris
Greek prime minister Antonis Samaras after his meeting with Greek president Karolos Papoulias. Photograph: AP Photo/Petros Giannakouris

Updated at 3.51pm BST

2.53pm BST

Opening rise on Wall Street lifts European markets

An opening rise on Wall Street has given a lift to global markets.

The Dow Jones Industrial Average has added 49 points or 0.3% in early trading, ahead of a congressional testimony from US Federal Reserve chairman Ben Bernanke on Wednesday. The meeting will be closely watched for any comments on the Fed's bond buying programme, and whether its quantitative easing could be coming to a close. Recent remarks by Fed members have suggested that actions to boost the economy could start tapering off.

With the money taps providing a major influence on the stock market rally, any signs they will be switched off could see shares decline from their recent peaks.

At the moment though, investors are still in the mood to wait and see. So with the positive start in the US, the FTSE 100 is at its best levels of the day, up around 25 points at 6781and close to its 2000 peak of 6798. Higher than that, and we are back in territory last seen in 1999, and not far off the all time peak of 6930.

Meanwhile European markets have also seen a turnaround after the US open. Both Germany's Dax and France's Cac 40 had drifted lower during the morning, but are now up around 3 points.

Italy's FTSE MIB and Spain's Ibex 35 are both in negative territory but are off their worst levels.

2.24pm BST

Interesting blogpost on Open Europe today, suggesting that the solution to Britain's "Europe problem" could be a new kind of membership of the EU, dubbed EEA plus.

This 'special status’ would give Britain the benefits of the single market, along with votes on issues that are relevent to the European Economic Area. 

Thus, the UK could keep influence on issues that really matter to it, like the financial system. It could also exclude itself from areas where closer integration wasn't desirable. So neither In nor Out.

Another great advantage of this model is that it could provide an institutional wrapping for all those countries that for one reason or another cannot be full EU members, and certainly not eurozone members: the UK, Norway, Switzerland and maybe even Turkey. It would be a new mode of European membership – and, if the UK can get its act together, very much the "economic growth" tier.

EEA plus: a model for the future of the UK in Europe?

And I'm handing over to my colleague Nick Fletcher. Thanks all. GW

1.42pm BST

Protester on St Peter’s Basilica in Rome

Italian businessman Marcello De Finizio stands on the dome of St Peter's basilica to protest against austerity measures on May 21, 2013 at the Vatican.
Photograph: ANDREAS SOLARO/AFP/Getty Images

An Italian businessman continues to hold a one-man anti-austerity demonstration on the dome of St Peter's basilica, having scaled it yesterday to protest against the European Union's economic policies.

Marcello Di Finizio, who owns a restaurant in Trieste restaurant, dodged security and scaled the basilica on Monday afternoon.

Authorities have been trying to persuade the 47-year-old man to come down, but so far without success.

Di Finizio, who has climbed the 137-metre dome twice before, is holding a banner which reads:

Stop this massacre, the political horror show is continue….help us Pope Francis..

Italian businessman Marcello De Finizio stands on the dome of St Peter's basilica to protest against austerity measures on May 21, 2013 at the Vatican. The businessman hung  a banner saying:
Photograph: ANDREAS SOLARO/AFP/Getty Images
Italian businessman Marcello di Finizio stands by his banner with writings against the Italian Government and the Euro as he protests on St. Peter's 130-meter-high (42-feet-high) dome, at the Vatican, Tuesday, May 21, 2013.
Photograph: Alessandra Tarantino/AP

Updated at 1.51pm BST

1.04pm BST

Letta demands EU action on growth and jobs

The Italian prime minister has warned that the European Union could implode unless leaders do more to deal with its economic crisis and the record levels of youth unemployment.

Enrico Letta, whose popularity has fallen steadily since he was sworn in last month, told the Senate in Rome this morning that EU leaders must show decisive action.

Otherwise, he warned, voters will reject the European project at the ballot box.

Here are Letta's key quotes (via the Ansa newswire)

I have the impression that the EU cannot keep going as it has up to today, with timidness or a lack of decisions.

Either it accelerates or it risks imploding…. As things are, I don't think it can hold up and the people will be the ones who make it implode the next time they vote.

Letta was briefing MPs before leaders gather for the next Council of Europe meeting on Wednesday. He said youth unemployment had to be an "absolute" priority, adding:

The EU is in a crisis of legitimacy over the lack of results [on youth joblessness].

The record levels of youth unemployment (over 60% in Greece now), so seem to have shaken European leaders and top officials in Brussels into action.

There's a great piece on this issue in Germany's Spiegel newspaper, which lambasts leaders for talking about the problem, but not fixing it.

Jobless Youth: Europe's Hollow Efforts to Save a Lost Generation

Here's a flavour:

Perhaps it takes reaching a certain age to recognize the problem. "We need a program to eliminate youth unemployment in Southern Europe. (European Commission President José Manuel) Barroso has failed to do so," says former German Chancellor Helmut Schmidt, now 94. "This is a scandal beyond compare."

Economists also argue that it's about time Europe did something about the problem. "The long-term prospects of young people in the crisis-ridden countries are extremely grim. This increases the risk of radicalization of an entire generation," warns Joachim Möller, director of Germany's Institute of Employment Research, a labor market think tank.

"It was a mistake for politicians to acknowledge the problem but do nothing for so long," says Michael Hüther, head of the Cologne Institute for Economic Research, which is closely aligned with employers. And Wolfgang Franz, former chairman of the German Council of Economic Experts, says that "unconventional approaches" are called for to combat not just youth unemployment but also its long-term negative consequences.

"Someone who is unemployed in his or her younger years will spend a lifetime struggling with poorer career opportunities and lower pay," he adds.

….

The Italian public are demanding action too, with well-attended protests over the weekend demanding a new economic plan:

Thousands of people protested in Rome urging Prime Minister Enrico Letta to focus on creating jobs.
Photograph: Francesco Fotia/Demotix/Corbis

Updated at 1.12pm BST

12.09pm BST

Pound thumped by inflation data

Pound vs Dollar, May 21 2013
Pound vs US dollar today. Photograph: Thomson Reuters

The pound has fallen more than one cent against the US dollar today following the news that UK inflation fell more than expected in March.

The drop in the consumer prices index, from 2.8% to 2.4%, means there's more chance the Bank of England will ease monetary policy again soon. Especially with new governor Mark Carney arriving this summer:

Andy Scott, account manager at HIFX, commented:

Whilst the economy seems to be showing some more positive signs of recovery, it’s still very sluggish and there’s still the risk of seeing further contractions unless the pace of recovery picks up, especially with the eurozone still in recession.

The new governor will no doubt be keen to make his mark at the Bank when he starts in July and he may well opt for additional quantitative easing to further aid the recovery.

Updated at 12.09pm BST

11.53am BST

The overview of the Bundesbank's latest monthly report is online here (pdf).

Its upbeat assessment of the German economy is accompanied by this warning:

However, the poor economic conditions prevailing in many parts of the euro area and the current problems associated with the sovereign debt crisis mean that macroeconomic risks remain high.

11.29am BST

Bundesbank urges rigour over deficit targets

Bundesbank, German Federal Bank facade.
Photograph: imagebroker/Alamy

Gerrmany's economy is on track for a solid recovery in the current quarter, the Bundesbank has predicted in its new monthly report on Europe's largest economy.

The German central bank also warned European leaders not to relax their deficit targets too much, as this would – in its view – hurt credibility in the eurozone.

The Bundesbank pointed to a recent rise in production orders across the country's manufacturing base:

Overall economic activity is expected to improve markedly in the second quarter of 2013, a view that is supported not only by the likely catching- up effects in response to the weather-related downturn in construction activity during last winter.

With industrial new orders picking up appreciably after a poor start to the year, there is reason to hope that exports and investment in machinery and equipment – the demand components that can usually be relied upon most to set the pace for the German economy – will recover as well.

Last week's GDP data showed that Germany grew by just 0.1% in the first three months of 2013, as the wider eurozone shrank by another 0.2%.

And on the issue of flexibility when applying deficit-reduction rules, the report said:

The binding effect (of the rules) threatens to be damaged from the start if the impression arises that necessary deficit reduction could perpetually be pushed back as long as sufficient political pressure is applied.

(quotes via Reuters)

The key word here is 'perpetually', I suspect. Spain and France are already being offered more time to get their deficits below the EC's 3% target — without any alarm in the financial markets.

Updated at 11.51am BST

11.07am BST

Key event

Interesting piece in the Wall Street Journal today about how the eurozone crisis has prompted a surge in grass root politic:

It looks at the Spanish municipality of Torrelodones, where housewife-turned-mayor Elena Biurrun has thrown out official perks and used the savings to improve school and local infrastructure since being elected two yeas ago:

Here's a flavour:

At her inauguration Ms. Biurrun choked up before a jubilant crowd.

Then she began slashing away. She lowered the mayor's salary by 21%, to €49,500 a year, trimmed council members' salaries and eliminated four paid advisory positions.

She got rid of the police escort and the leased car, and gave the chauffeur a different job. She returned a carpet, emblazoned with the town seal, that had cost nearly €300 a month to clean. She ordered council members to pay for their own meals at work events instead of billing the town.

"I was so indignant seeing what these people had been doing with everyone's money as if it were their own," Ms. Biurrun said.

10.37am BST

European markets dropping back

After yesterday's record high on the German DAX, European stock markets are mostly down this morning. In London, though, the FTSE could hit another 12-year high today, after closing at its highest level since September 2000 yesterday.

European stock markets, May 21 2013, morning
Photograph: Thomson Reuters

Traders are anticipating the prospect of central bankers starting to withdraw the drip of monetary stimulus, especially with the Fed's Ben Bernanke testifying at Capitol Hill tomorrow.

It's the old argument over whether we're experiencing a bubble that's threatening to pop, or if the central banks are cannily guiding us to a point where genuine confidence and economic fundamentals take over.

As Yusuf Heusen, sales trader at IG, explains:

Perhaps global growth doesn’t merit markets at these highs, but liquidity-boosting actions from central banks take precedence.

The City is also absorbing a profits warning from cruise liner firm Carnival, as my colleague Nick Fletcher explains: FTSE heads for new 13 year high, but Carnival sinks 13% after warning on earnings…

… and the surprise departure of G4S boss Nick Buckles, 10 months after its Olympic security debacle.

Updated at 11.58am BST

9.50am BST

Economist Rob Wood of Berenberg Bank agrees that UK inflation is heading higher, despite this morning's surprise drop:

The squeeze on consumers from higher inflation will get worse before it gets better, but today's data highlights that underlying inflationary pressures remain well contained.

Inflation is likely to peak, probably around the 3 percent mark maybe a touch below, this summer which is much better than it seemed a few months ago.

9.47am BST

UK inflation, the early reaction

Duncan Weldon, the TUC's senior policy officer, cautions against getting too excited by today's drop in inflation:

While Societe Generale's Kit Juckes warns that the cost of living will probably head higher:

And IG's Chris Beauchamp reckons it gives the new Bank of England governor, Mark Carney, more leeway to waggle the monetary policy levers:

9.37am BST

UK inflation drops

Just in, UK inflation has fallen for the first time since last September.

The Consumer Prices Index came in at 2.4% last month, the Office for National Statistics reported. That's a surprise drop after March's 2.8%, and closer to the Bank of England's official target of 2%.

Lower fuel and lubricant costs were the prime factor, the ONS said.

Good news for the UK, although real wages are still failing to keep pace (they're rising by around 0.8% annually, on average).

Reaction to follow.

Updated at 9.38am BST

9.26am BST

Draft law to bail-in large depositors approved

Europe has moved a step closer to bailing in large depositors in future bank rescues, as happened in Cyprus this year.

Last night, the European Parliament's economics committee approved draft legislation under which customers with more than €100,000 would be liable to fund a rescue package. Smaller savers, though, would still be protected.

This new bank recovery and resolution mechanism is meant to end the era of taxpayer-funded bank rescues. Bank of England Deputy Governor Paul Tucker called it a milestone towards a world where governments were no longer willing to rescue banks that are “too big to fail”.

Under the EU proposal, a bank would dip into large deposits of over €100,000 once it had exhausted other avenues such as shareholders and bondholders, Reuters explains.

There could still be a battle, though, over who stands first in line for losses.

Sven Giegold, a German Green lawmaker, explained:

The struggle will be how binding the bail-in and the hierarchy of liabilities is.

That issue of seniority of claims is explained well by Frances Coppolo, former banker, here: The equivalence of debt and equity.

It explains how, if bank is in trouble, losses are initially suffered by shareholders, before working their way down this table:

Bank liability structure
Photograph: Frances Coppola

So for all the talk about Cyprus being unique, its bailout was clearly a watershed, as Matina Stevis of the Wall Street Journal points out:

8.52am BST

Vodafone warning on Southern Europe

Good morning, and welcome to our rolling coverage of the latest developments in the eurozone financial crisis and across the global economy.

The economic crisis in Southern Europe has been laid bare by Vodafone this morning.

It warned shareholders that it has been scorched by the ongoing slump in demand in Spain, Italy, Portugal and Greece, blaming "severe macroeconomic weakness" across the region.

Vodafone is taking a new £1.8bn impairment charge on its Spanish and Italian operations, taking its total writedowns on Southern Europe this year alone to a hefty £7.7bn.

Revenue in Southern Europe are down by 16.7%. Some of that can be blamed on competition, but mostly its due to the biting recession in the eurozone's weaker members, amid austerity cuts and record unemployment.

Vittorio Colao, chief executive, didn't pull his punches either, saying;

The macroeconomic environment in Southern Europe has been very challenging.

And today's financial results back this up — with a 12.8% tumble in service revenue in Italy, partly driven by "the severe macroeconomic weakness". In Spain, they fell 11.5%.

In Greece, too, revenues are down by 13.4%.

OK, a nation's mobile phone bill isn't exactly the last word in financial modelling. But it just shows what an economic crisis means in practice — for companies, fewer calls means less business, while for consumers it's another sign that they simply can't afford to spend what they used to.

As usual, I'll be tracking all the news through the day….

Updated at 8.57am BST

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In the trading room today: EUR, GBP and JPY in the Spotlight This Week. As the trading week gets underway, we prepare for a sequence of economic events from the euro-zone, the U.K. and Japan and explore the outlook for the EUR, the GBP and the JPY, we list the Top 10 spotlight economic events that will move the markets in the week ahead, we examine the consensus forecasts for the upcoming economic data, we analyze the latest trend developments in the EUR/USD currency pair, we keep an eye on the USD/JPY pair, we take a look at a support level established in the GBP/USD currency pair, we highlight the market’s reaction to the warning by the Japanese economy minister, we discuss new forecasts from Bank of New York-Mellon and Bank of Tokyo-Mitsubishi, and prepare for the trading session ahead.

May 19, 2013 (Allthingsforex.com) – With the Bank of Japan’s announcement and the minutes of the Fed’s May meeting on the agenda, the week ahead will offer further insight into the future plans of these two major central banks and their unprecedented monetary policy easing efforts.

In preparation for the new trading week, here is a list of the Top 10 spotlight economic events that will move the markets around the globe.

1.    GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., May 21, 4:30 am, ET.

Inflationary pressures in the U.K. are forecast to see a slight pullback to 2.7% y/y in April from 2.8% y/y in March. Although the CPI remains above the Bank of England’s 2% target, inflation has subsided significantly from last year and could continue to inch lower as the bank pointed in its latest inflation report.

2.    JPY- Japan Trade Balance, an important gauge of economic activity measuring the difference between imports and exports, Tues., May 21, 7:50 pm, ET.

The consensus forecasts point to another month of rising trade deficit by 621 billion yen in April from a deficit of 362.4 billion yen in March, despite of the significant devaluation of the yen since November, 2012. However, there may be a potential for a positive surprise as the Japanese economy managed to turn a corner and returned back to growth in the first quarter, while also registering a current account surplus. If the report fails to instill optimism and triggers concerns that economic conditions are not improving, the yen could remain under pressure on expectations that the Bank of Japan might be forced to step up their efforts to weaken the currency as a tool to stimulate export growth.

3.    JPY- Bank of Japan Interest Rate Announcement, Wed., May 22, around 12:00 am, ET.

As the impact of the Bank of Japan’s massive amounts of asset purchases begins to be reflected in the latest economic data which has registered better than expected readings, the Japanese central bank will probably not feel the need to do more at this point. Policy makers will be likely to reaffirm their open-ended commitment to aggressive QE until the 2% inflation target is in sight. A Bank of Japan not in a hurry to step up its easing efforts could trigger a long overdue correction of the yen’s losses.

4.    GBP- Bank of England Meeting Minutes, a detailed report of the bank’s latest meeting containing an outlook on monetary policy and the economy, Wed., May 22, 4:30 am, ET.

In recent months, the Bank of England has chosen to sit on the QE sidelines while other central banks have either continued or have resorted to additional monetary policy easing. The GBP has benefited from the Bank of England’s restraint and could continue to lure bids should the minutes confirm that the majority of policy makers see no urgency to increase the size of the Asset Purchase Program.

5.    USD- U.S. Existing Home Sales, the main gauge of the condition of the U.S. housing market measuring the number of closed sales of previously constructed homes, condominiums and co-ops, Wed., May 22, 10:00 am, ET.

Following last week’s surprising drop in housing starts, we could witness a more upbeat U.S. housing market data with sales of existing homes forecast to increase to 4.99 million in April, compared with 4.92 million in March.

6.    USD- U.S. FOMC Meeting Minutes, a detailed report of the Fed’s latest meeting containing an outlook on monetary policy and the economy, Wed., May 22, 2:00 pm, ET.

At its May meeting, the Fed signaled that the size of monthly asset purchases may be reduced or increased depending on economic conditions. The minutes would probably confirm this stance, while echoing the Fed’s decision to stay on the QE course until the unemployment rate drops below 6.5% or inflation rises above 2.5%. The USD could see pressures rising if the report reassures the markets that the Fed’s open-ended quantitative easing is not going away anytime soon.

7.    EUR- Euro-zone Composite PMI- Purchasing Managers Index, a leading indicator of economic conditions measuring activity in the manufacturing and services sectors, Thurs., May 23, 4:00 am, ET.

The euro-zone economy is expected to continue to suffer from the chronic contraction in its manufacturing and services sectors as the Composite PMI stays in contraction territory below the 50 boom/bust line for another month with a reading of 47.0 in May from 46.9 in April. With the economy failing to return to growth in the first quarter of 2013, the report could weigh on the EUR by increasing the odds that the European Central Bank might be forced to announce additional monetary policy easing measures as early as the bank’s next meeting on June 6.

8.    GBP- U.K. GDP- Gross Domestic Product, the main measure of economic activity and growth, Thurs., May 23, 4:30 am, ET.

In the first quarter of 2013, the U.K. managed to avoid a triple-dip recession with the economy growing by 0.3% q/q after contracting by 0.3% q/q in the final quarter of last year. The revised reading is expected to be in line with the preliminary estimate, confirming that disaster has been averted. Provided that there are no unexpected surprises, the report should reduce further the odds of more QE by the Bank of England and could boost the GBP.

9.    USD- U.S. New Home Sales, an important gauge of housing market conditions measuring sales of newly-constructed homes, Thurs., May 23, 10:00 am, ET.

Similar to the existing home sales, a small increase is also expected in the U.S. new home sales, with consensus forecasts estimating a reading of 429K in April compared with 417K in March.

10.    EUR- Germany IFO Business Climate Index, a leading indicator of economic conditions measuring the outlook of businesses, Fri., May 24, 4:00 am, ET.

After the shocking drop in the ZEW economic sentiment index, the business outlook in the euro-zone’s largest economy is forecast to be a bit more optimistic with the Ifo index rising to 104.6 in May from 104.4 in April. The EUR could continue to feel the pressure if the index disappoints and paints a dire economic picture, increasing the probability of more easing by the European Central Bank.

May 18, 2013 (By Marcus Holland of Financialtrading.com) – The Australian dollar has experienced a colossal collapse during the past two weeks declining more than 3 big figures this week on top of last week’s 3 big figure decline.  The currency pair has sliced through par which it has remained above since moving through it in June of 2012.  The technical picture is bleak, and managed money will have likely exited long positions.

The run on the Aussie began after the central bank cut its benchmark interest rate by 25 basis points and downgraded its growth figures.  The currency pair received a temporary respite when the government released solid employment figures.  This respite was short lived as negative momentum gains a foot hold putting the currency on the defensive.

The weekly technical picture shows the decline of the currency pair toward support levels.  The AUD/USD could easily test the .9580 region before testing the 2011 lows near .9390.

The daily technical picture is impressive as the currency pair has moved lower on seven consecutive trading days.  Earlier in the month of May, the 20-day moving average of the AUD/USD crossed below the 50-day moving average which reflects a negative short term trend is now in place.

The daily MACD (moving average convergence divergence) index is printing in negative territory and the trajectory continues to point to further negative price action.  The RSI (relative strength index) is printing near 18, which is well below the oversold trigger of 30 and could forecast a rebound in the currency pair.

Despite the Australian dollar’s decline in recent weeks, there has been interest in long position by hedge funds in Aussie futures contracts.  According to the latest CFTC report for the week ending to May 7, the gross long Australian dollar position was 61.5k contracts.  This weekend’s commitment of traders report is likely to show a change given the large reducing in the Aussie currency futures contract.

Next week (the week beginning May 20, 2013), there are a number of data points that could alter the outlook for the AUD/USD.  On Tuesday the 21st, the RBA will release its meeting minutes.  This will give investors a look inside the bank and attain a better idea of their potential dovishness.  On Wednesday investors will view consumer confidence and on Thursday the government will release consumer price information.  The CPI will likely be the biggest market mover, a low level of inflation will allow the Aussie to continue to move lower.

The RBA during its last meeting when it cut interest rates by 25 basis points downgraded its outlook on GDP, which they believe will likely move toward the 2.5% level in 2014.  The trajectory of growth seems to be holding up but the recent decline in the outlook for China, along with the decline in commodity prices is likely to generate headwinds for growth prospects.
 

 

The outlook may be opimistic but the Greek unemployment picture remains dire. EU car sales rise for first time in 19 months. Spanish bad loans rise. Italian government to reform property tax. US consumer sentiment index rose to its highest level in six years, up from 76.4 in April to 83.7 so far this month…

 


Powered by Guardian.co.ukThis article titled “Eurozone crisis as it happened: Greece on track to exit slump next year, says Troika” was written by Graeme Wearden and Nick Fletcher, for theguardian.com on Friday 17th May 2013 17.08 UTC

6.08pm BST

IMF report on Cyprus leads to new anti-austerity row

Crisis-hit Cyprus could be headed for a much worse recession than initially anticipated when international creditors agreed to prop up its economy, the IMF has announced in a 47-page report released today. Helena Smith writes:

Forecasting that the island’s output will shrink by at least 9% in 2013 (and perhaps even more) the IMF said Cyprus faced “unusually high” macro-economic risks if it did not adhere to the stringent terms of the €13bn bailout it has signed with the EU, ECB and IMF.

"Should these risks materialize, additional financing measures may be needed to preserve debt sustainability," it said, predicting that the tiny nation’s debt load would hit 126% of gross domestic product in 2015 before falling to 105% of GDP by 2020. 

Despite having already agreed to draconian belt-tightening measures – including highly controversial capital capitals – it was likely that Nicosia would be required to further slash GDP by 4.7% a year (the equivalent of €900m worth of budget cuts) over 2015 to 2018 to secure the island’s long-term primary budget surplus, said the IMF.

With the ink on the loan agreement barely dry, the report has unleashed fury among politicians on the island with the anti-austerity main opposition Akel party not only slamming the bailout deal but questioning if the government had read it before it signed up to the agreement. 

Akel cadres say the IMF assessment will embolden those now openly asking if it would not be better for the beleaguered island to exit the eurozone than apply such tough conditions.

And on that note, it's time to shut up shop for the evening and for the week. Thanks for all your comments, and we'll be back next week.

6.01pm BST

Here's the full statement on the EFSF payments to Greece.

As IfigEusLannuon rightly points out below the payments are loans not aid and have to be paid back.

5.39pm BST

Slovenia debt cut by Fitch

Slovenia has seen its debt rating cut by Fitch, the agency has just announced.

Last month Moody's reduced its rating on the country to junk, from Ba1 to Baa2.

Now Fitch has cut from A- to BBB+ with a negative outlook. It said the economic outlook had deteriorated and it now forecast a 2% decline in GDP in 2013. It predicts a 0.3% decline in 2014, leaving it as only one of two eurozone countries to contract.

The agency said its estimates of the cost of bank recapitalisation were higher than official forecasts. It estimated the sector needed an injection of €2.8bn, with €2bn needed for the three largest banks. This is more than double the official estimate.

5.27pm BST

European shares on the rise again

European car sale figures and the positive US consumer sentiment data have combined to keep markets moving higher.

• The FTSE 100 finished 35.26 points higher at 6723.06

• Germany's Dax rose 28.13 points to 8398.00

• France's Cac climbed 22.20 points to 4001.27

• Italy's FTSE MIB added 60.6 points to 17,604.61

• Spain's Ibex was up 40.1 points at 8582.4

• The Athens market added 1.62% to 1152.6

And in the US, the Dow Jones Industrial Average is currently around 60 points or 0.,4% higher.

4.14pm BST

Still with Greece, the ESFS bailout fund has said the country will receive €4.2bn of the next tranche of €7.2bn aid.

That takes the total aid so far to €120bn. The next payment will be made in June.

3.42pm BST

Tensions grow after ejection of Golden Dawn MP

More on this morning's ejection of a far-right MP from the Greek parliament, which has sent political tensions soaring. Helena Smith writes:

Predictably, the extreme right Golden Dawn party was quick to roll out an announcement following the removal of its MP, Panayiotis Iliopoulos, from the 300-seat House.

Railing against the “filthy slanderous attack of the entire media against Golden Dawn” it denied than any of its MPs had shouted “Heil Hitler” during the heated exchange in the chamber, [see earlier post].

“The controversial and provocative phrase was uttered by Syriza’s MP from Zakynthos, Stavros Kontonis,” it insisted. “We demand from the parrots of the system who have linked Golden Dawn with this particular phrase to revoke [their stance] immediately, otherwise they will suffer the legal effects [that come with] dissemination of false news and slanderous defamation.”

Video of Greek parliamentary session

Hours later, minutes taken during the session revealed the offending phrase had been uttered not by the neo-Nazi party’s spokesman, Christos Pappas, as initially believed, but Christos Panztas, an MP with the far-left Syriza, the country’s main opposition party. Pappas was the focus of another parliamentary furore earlier this week when it was exposed that he had openly praised the Fuhrer in a piece written for Golden Dawn’s magazine years ago.

The incident does not bode well – even if this is not the first time a Golden Dawn MP has caused commotion in the House. With the party now able to take the moral high-ground, many worry the episode could stoke further the flames of support for the far right group shown in the latest poll to be published today as firmly entrenching its position as Greece’s third major party with 11.5%t.

On Thursday. Thessaloniki mayor Yiannis Boutaris said Golden Dawn’s presence in parliament was “a disgrace.” “Golden Dawn should not be in the parliament. This party is a disgrace for Greek society. The fact that this party is third is indicative of the abjection of Greek society.”

Updated at 3.42pm BST

3.01pm BST

US consumer sentiment at six year high

There's an upbeat mood in the US, to judge from the latest consumer survey.

The Thomson Reuters/University of Michigan's sentiment index rose to its highest level for six years, up from 76.4 in April to 83.7 so far this month. That was higher than the forecast of around 78.

Consumers were more positive about their personal finances than at any time since 2007, especially among households in the top third of income levels. Annalisa Piazza at Newedge Strategy said:

Today's outcome was somehow at odds with the recent news on the development of the US economy that depicted a rather mixed picture, with solid retail sales versus sluggish business confidence indicators. If anything, consumer confidence might have been supported by lower gasoline prices that implicitly prop up buying conditions for US households. That said, we suspect US households continue to remain sceptical on the development of future activity as headwinds to growth remain well alive.

The news has helped lift the Dow Jones Industrial Average by more than 50 points in early trading.

Updated at 3.03pm BST

2.46pm BST

EC report into Greece

Greece is on track to emerge from its economic slump next year, its lenders predicted today.

The European Commission's latest report into Greece, published today (you can download it here), argued that Athens is making significant progress under its bailout deal.

Following its latest visit to Greece, Troika officials remain convinced that the Greek economy will start growing in 2014, with a GDP increase of 0.6% next year.

The top-line of the report is quite upbeat about a country that has suffered deeply since the crisis began:

Public finances are steadily improving, the banking sector recapitalisation has reached an advanced stage and important structural reforms are being implemented, although further major efforts are needed to fully
deliver the delayed public administration reform and to make the new semi-autonomous revenue administration effective in the fight against tax evasion.

But the Troika also cautioned that the fiscal outlook beyond 2014 "remains inherently uncertain", as further austerity measures will be needed to hit future targets:

The fiscal outlook depends to a large extent on progress in strengthening the tax and social security revenue administrations. Within the current macroeconomic framework, the gaps are currently estimated at about 1.7% of GDP in 2015 and 2.1% of GDP in 2016. The task of filling the gap in 2015-16 will be taken up in the context of the 2014 budget
negotiations in the fall.

The report also predicted that Greek wage costs will be driven down by another 7% this year, following a 4.2% drop in compensation per employee last year. That will mean Greece will "regain its 1995 labour cost competitiveness position relative to the Euro area" in 2014.

Greek labour costs, Troika assessment
Greek labour costs, Troika assessment Photograph: /EC

The Troika also remains concerned about Greece's banks, saying they continue to face "the consequences of the recession and the inability of some borrowers to service their debt obligations".

And on unemployment, the picture is pretty bleak, with the jobless rate expected to remain over 20% in three years time.

The number of dismissals still remains high and the overall labour market is likely to remain weak until GDP begins to recover.

Hence, the annual unemployment rate is projected to peak at 27.0% in 2013. Once the recovery gains traction, especially the frontloading of wage adjustments is projected to give rise to a relatively rapid and sustainable decline in unemployment to 26.0% in 2014 and to 21.0% in 2016.

And on that note, I'm handing over to my colleague Nick Fletcher for the rest of the day (easing back into things). Thanks all, and best wishes for the weekend. GW

Updated at 3.00pm BST

2.19pm BST

Europe's contruction industry suffered another poor month in March, with output falling by 1.7% month-on-month across the eurozone (and 1.1% across the EU).

Eurozone construction data, to March 2013
Eurozone construction data, to March 2013 Photograph: /Eurostat

The largest decreases were seen in Portugal (-10.7%), the Czech Republic (-7.6%) and Slovakia (-5.0%), with the highest increases in Romania (+2.8%) and Spain (+2.4%).

New data was only available for 14 members of the EU: production fell in ten countries, and only rose in four.

1.53pm BST

An invitation

Would you be interested in meeting your fellow contributors – along with the journalists who run the blog?

The Guardian’s news community team are hosting a meet-up event at the Guardian’s offices at Kings Place in London on 5th June. The setup will be informal – with drinks and nibbles and a chance to get to know other top contributors followed by a Q&A with the Guardian liveblogging team.

If you're interested in attending, please email james.walsh@guardian.co.uk.

1.39pm BST

As it's quiet, here's a couple of interesting posts that caught the eye this morning….

Reuters' James Saft has written a nice piece about how quantitative easing may be backfiring, by encouraging investors to hold more cash rather than riskier assets.

The thinking behind QE rests partly on the assumption that buying up government bonds will drive interest rates down and entice investors to tilt their holdings towards riskier investments like stocks. That in turn is supposed to goose investment and consumption.

Unfortunately, that assumption may be running afoul of, or fouling up, the way in which most investors construct their portfolios.

Saft is riffing off this research note published earlier this week Toby Nangle, fund manager at Threadneedle Investments. In it, Nangle explained how investors would usually buy government bonds as a handy hedge against riskier holdings in shares. QE, though, has driven prices so high that the strategy doesn't work:

By bidding yields on government bonds down to current levels, monetary policymakers have largely extinguished government bonds as an effective portfolio hedge.

Elsewhere, fund manager/blogger @pawelmorski has rattled out another interesting piece, pinning the blame for Europe's recent economic misery on its banks, rather than government austerity: It Is That Simple: Europe’s Problem is the Banks.

US/EU bank lending
US/EU bank lending Photograph: /@pawelmorski

These two series are a long way from directly comparable but they’re close enough that the divergence is interesting. US firms are borrowing again, European ones aren’t. This looks like a clear-cut job for monetary policy.

Timely, given the news this morning that Spain's bad bank debts are rising (see 9.07am).

12.58pm BST

Mersch: eurozone governments must make tough choices

Yves Mersch, ECB executive board member, has given a speech in London today on the future of the eurozone, and the mistakes that led to the current crisis.

It's an interesting insight into current thinking in the ECB, Mersch talks about the importance of getting banking union agreed, but also focuses on the need for 'structural' change within Europe.

On how the crisis began, Mersch explained:

The euro area has been facing insufficiencies on several fronts, all at the same time. Let me be blunt: it has had governance shortcomings, stretched states, fragile banks, shrinking economies, sinking confidence in institutions and doubts about its integrity. Each of these difficulties has exacerbated the others; it has been a vicious circle. The crisis did not originate in the euro area, nor is it limited to it. But inside the euro area it has inflicted severe losses and pain, particularly on the younger generation

Mersch also fleshed out the challenge facing national governments:

In most of the stressed euro area countries this still requires tough choices across the generations and over time: e.g. education versus pension entitlements, infrastructure versus healthcare, research and development versus defence, and so on.

Strengthening of tax administrations and treasury systems, expenditure control, privatisation will also be crucial. Reducing the costs of bureaucracy will matter more than ever across the euro area.

There are varying needs for true innovation clusters à-la-Silicon Valley, as well as investments in scientific and technical education, research and development, encouragement of “angel investments”, and grassroots and sustainable banking.

Labour markets need to become inclusive and fair in every country, while encouraging labour mobility, in particular in a monetary union. Greater competitiveness and sustainable growth of the whole euro area will then follow.

This has been a regular theme at Mario Draghi's press conferences too. Critics, though, argue that it's hard for leaders in, say, Italy or Spain to push through structural reforms at the same time as chasing demanding deficit-reduction targets.

Mersch's speech is online here, resolutely titled: “Built to Last”: The New Euro Area Framework

12.23pm BST

Italy to reform property tax

The Italian government has agreed to reform the unpopular IMU housing tax, a key demand from coalition partner, the People of Liberty party.

Prime minister Enrico Letta told a press conference that payments will be suspended in June, adding:

We are setting a time until August 31 within which the government and its supporting majority will reform IMU.

Letta added that the cost of reforming IMU would come "100%" from spending cuts.

IMU was introduced by former technocratic leader Mario Monti, and proved deeply unpopular. Silvio Berlusconi's election campaign earlier this year focused on his promise to abolish it. Getting rid of it altogether would cost €8bn.

Letta also announced a new €1bn fund to help unemployed people get back to work.

Opinion poll data today showed falling support for Italy's new coalition government of centre-left, centre-right and centrist parties. Letta only enjoyed 43% support when he was sworn in under a month ago, but has now lost nine percentage points.

Updated at 12.30pm BST

11.51am BST

In the UK, a Bank of England monetary policymaker has declared that the British economy may be inching back to recovery.

Martin Weale told an audience in Birmingham:

No one can be certain but it is possible that the near-stagnation of the past three years is being replaced by a move to modest growth.

Weale also argued that the BoE's monetary policy committee should resist acting like "inflation nutters", and use its new, more flexible mandate on inflation targeting wisely:

The correct thing for policymakers to do would be to accept a modest degree of entrenchment of raised inflation expectations as a price worth paying for a smoother output path.

The full speech is online here: and includes this handy graph showing how UK wage growth has stuttered to a near-standstill (just 0 .8% year-on-year)

UK wage growth levels
UK wage growth levels Photograph: /BoE/ONS

Weale's speech also includes a reference to a lecture given by some chap called Mark Carney….

11.10am BST

Shares in several Europe's carmakers have risen today, following the news this morning that sales rose year-on-year in April.

Peugeot Citroen is leading the risers, up 6% (despite reporting a 10% drop in its own sales during the month).

Automobile share prices, May 17th
Photograph: Thomson Reuters

10.43am BST

Exciting scenes in the Greek parliament this morning, where a Golden Dawn MP was thrown out of the chamber amid a stream of cursing.

Panayiotis Iliopoulos was shown the door after claiming that opposition party leader Alexis Tsipras was working on a "souped-up question" for prime minister Antonis Samaras. The PM, Iliopoulos claimed, was "sleeping the sleep of the just" (he's actually on a trip to China).

Kathimerini has the details:

Pulled up,,,for using derogatory language, Iliopoulos went further, condemning fellow MPs as "wretched sell-outs" and "goats". He was removed from the House, cursing all the while, witnesses said.

Also in Friday's session, a request by former prime minister and socialist PASOK deputy George Papandreou to be granted leave so he can attend a conference abroad prompted hoots of laughter from Golden Dawn MPs in attendance.

Updated at 11.22am BST

10.04am BST

Speaking of Spanish banks… DonJuan points out below that the former boss of Caja Madrid was remanded in custody last night and relieved of his passport.

Miguel Blesa is being investigated over "alleged irregularities" in the lender's 0m purchase of the City National Bank of Florida in 2008.

El PaIs's story has more details:

Caja Madrid took control of City National Bank of Florida in 2008 after paying 618 million euros for 83 percent of the US lender in a deal approved unanimously by the Spanish bank’s board of directors in order to “strengthen” its presence in America.

The Bank of Spain noted that as well as excessive investment in the US lender the purchase was carried out in such a way as to “elude the obligatory control of the tax and economy authorities in Madrid.”

Caja Madrid is one of the firms that were merged to form Bankia, with ill-fated results.

Updated at 10.36am BST

9.37am BST

Spain’s ‘extend and pretend’ strategy

The rise in Spain's bad loans in March follows a drop earlier this year, when Spanish banks transferred some toxic assets to the country's new Bad Bank.

Analysts fear that Spain's banking sector is still refusing to face reality by admitting that other loans won't be repaid.This is the “delay and pray” strategy, where credit is extended even though the borrower is highly unlikely to repay the money.

The FT did a good piece on the issue yesterday. In it, Santiago López, a Madrid-based bank analyst at Exane BNP Paribas, explained:

Some of the clients that have been restructured will eventually be able to pay back their debts. In many other cases the proverbial can has just been kicked down the road and we believe that banks will need significantly higher provisions to deal with restructured loans.

9.07am BST

Spanish bad loan data

The bad loans festering in Spain's financial sector swelled again in March, data just released by its central bank shows.

A total of €163.3bn of loans are now 'non-performing", the Bank of Spain reported. That pushes the bad loan ratio up to 10.47%, from 10.39% a month.

8.45am BST

The broader picture for Europe's car industry remains pretty tough this year — even if April's encouraging data does show that the sales decline is bottoming out.

Major manufacturers have suffered big losses in the region, and many assembly lines are running below full capacity. Last month alone, Ford reported that its European losses had tripled, while Volkswagen reported a 38% drop in earnings.

It's a long, long way back to the heady pre-crash days – if, indeed, such conditions can be repeated.

As Stephen Odell, head of Ford's European Operations, told the WSJ in an article published yesterday:

We are hopeful that we can see signs of troughing or plateauing during the course of this year but I'm not sure that we have seen it yet.

Updated at 8.46am BST

8.27am BST

The rise in new car registrations last month shows consumers are more optimistic about economic prospects, argues Gian Primo Quagliano, the head of automotive research company CSP in Bologna, Italy.

Quagliano told Bloomberg that recent talk of European leaders easing off on austerity in favour of growth-friendly measures is also helping:

The recovery of sales in Germany is positive and may be an indication that consumers are getting back into the market on signs that austerity in Europe may be close to an end

When the car market changes direction, the reason is never just related to technical calendar effects.

More here.

8.04am BST

Euro car sales post first increase since September 2011

Good morning, and welcome to our rolling coverage coverage of the Eurozone financial crisis, and other interesting developments across the global economy.

And for once, we can start with some encouraging economic news — European car sales have risen, breaking a downward trend that dates back to the end of September 2011.

Purchases of new cars across the European Union in April were 1.7% higher than a year ago, data from the European Automobile Manufacturers Association (ACEA) released this morning showed.

Rising demand from Germany (+3.8%), the UK (+14.8%) and — perhaps most surprisingly — Spain (+10.8%) led the way.

These graphs, comparing monthly sales to the previous year, shows how the long downturn has finally been broken.

European car sales to April 2013
Photograph: ACEA

ACEA's full report is here (pdf)

We need to be cautious about hanging out the bunting, though. There are three reasons to be cautious:

• There were another two working days in April 2013 – more opportunity to nip down to the showroom or haggle a credit agreement with the bank

• Demand for new cars continued sliding in two key economies at the heart of the crisis – France (-5.3%) and Italy (-10.8%).

• This small rally in April doesn't wipe away the disappointment of January, February and March. New car registrations over the first four months of the year are 7.1% lower than in 2012.

And as ACEA put it:

In absolute figures, it is the third lowest level of new registrations for a month of April.

Still, it's nice to start the blog with some upbeat data, especially from a sector that's been badly dented by Europe's economic troubles.

Reaction to follow…

Coming up today, the main political developments could some in Italy, where Enrico Letta's cabinet is meeting to discuss measures to revive its economy.

On the economics front, we have fresh eurozone construction data at 10am BST.

And in finance, the European Central Bank will release an update on how much money has been repaid by banks who borrowed from its huge liquidity injections (the LTRO programme).

I'll be tracking all the latest developments as usual.

Updated at 9.02am BST

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The Japanese economy expanded more than expected by 0.9% q/q in the first quarter of the year. PM Shinzo Abe’s stimulus package could generate feel-good factor needed to end two decades of stagnant growth and a template for Europe…

 


Powered by Guardian.co.ukThis article titled “Eurozone crisis live: Japan’s strong growth figures show Europe the way” was written by Phillip Inman, for theguardian.com on Thursday 16th May 2013 15.01 UTC

4.01pm BST

Time to close the blog…

Thank you for all your comments. It was a rumbustious, lively exchange of views, as Boris Johnson might say. Graeme Wearden is back tomorrow, no doubt armed with more pictures of rioting Greeks. To anyone who missed their regular fix, I apologise.

3.57pm BST

French President Francois Hollande gives a press conference on May 16, 2013 at the Elysee Palace in Paris, a day after his first anniversary in office was marred by news that France had fallen back into recession amid plummeting economic indicators.
French President Francois Hollande at a press conference this afternoon at the Elysee Palace in Paris, a day after his first anniversary in office was marred by news that France had fallen back into recession amid plummeting economic indicators. Photograph: AFP/Getty Images

More scepticism from Michael Hewson. And its hard not see to see the whole French agenda being driven by a basic loss of confidence and search for a sugar daddy

3.50pm BST

Not everyone is embracing the other side of his argument – that everyone work longer and be more entrepreneurial

3.47pm BST

Hollande starts the fight back

Francois Hollande, French prime minister, has gone on the offensive after a run of bad figures, and especially yesterday's 0.2% contraction in GDP. The triple dip recession is a blow to Paris when Hollande promised to reject austerity in favour of growth.

But he's probably pushing in the wrong direction if he thinks closer political integration is on the cards and more than that, will be the saviour of France.

2.34pm BST

Our Ireland correspondent Henry McDonald has seen a think tank report that urges Dublin to push for growth in the eurozone or risk further pain

Henry McDonald, Dublin

One of Ireland's most respected economic think-tanks has warned that Irish growth rates depend on Europe turning the corner. The Republic's Economic and Social Research Institute has projeced that growth in Irish output and jobs will continue this year and into 2014.

In their latest Quarterly Economic Commentary, the ESRI predicts growth of 18% in 2013 and 2.7% in 2014. Crucially the ESRI believes unemployment could fall below 14% of the workforce. But, and it is a big but, the ESRI concludes that this relies on fellow Europeans buying the goods and services Ireland has to offer from its resilent export sector.

Due to global economic uncertainty, the ESRI urges the Irish government to continue to drive down the country's massive public sector debt.
By doing so it said that "the deficit will be eliminated and the public finance contraction will not be weighing on the domestic economy".

2.27pm BST

Bernanke will take a cautious line

James Knightley at ING bank believes the US unemployment and inflation figures will force the Fed chief to be a little more downbeat about the recovery, though the housing data was mixed.

In terms of today’s data it should be remembered that the drop in housing starts is a fall from a five year high while building permits rose 14.3% and yesterday’s National Association of Home Builders reported a rise in activity. We therefore suspect that the fall in housing starts figure is a temporary blip.

With the activity data moving in lots of different directions right now and inflation remaining benign it is highly unlikely that the Fed will change its policy stance anytime soon. Consequently, Bernanke is likely to adopt a cautious tone when he testifies before the Joint Economic Committee on the economic outlook next Wednesday.

Updated at 3.20pm BST

2.08pm BST

US inflation falls

A clarification on US inflation. I cited the year on year increase in CPI inflation of 1.1% in the last but one post, but the world is understandably more focused on the month-on-month figure which showed the cost of living fell in April for a second month, and as Bloomberg points out, "the first back-to-back declines in inflation since late 2008.

Just for the record, the month on month decline was 0.4%, helped mainly by lower fuel costs. And there is your mega stat of the day. When we ask ourselves why is the US improving and look to the Fed and Obama stimulus, we are only partly right. Low fuel costs for a modern economy run on oil is manna from heaven. Low inflation based on low petrol prices IS the stimulus. But as Bernanke knows, you don't want inflation to low for too long or you become Japan.

1.56pm BST

Former BP boss Tony Hayward in 2010 (with current chief executive Bob Dudley. Hayward is now interim chairman of Glencore
Former BP boss Tony Hayward in 2010 (with current chief executive Bob Dudley. Hayward is now interim chairman of Glencore Jim Young/REUTERS

Over in Switzerland there were some seriously bizarre goings on this morning at the Glencore AGM. First Sir John Bond, remember him as the former HSBC boss and swashbuckling banker, took the chair, only to step down in favour of former BP boss Tony Hayward, who promptly said he would step down as soon as a permanent successor was found. This is the world's largest publicly listed miner and commodites trader, which is the largest supplier of coal to power stations worldwide. It is not a nickel and dime company. Yet it has allowed the AGM to become a farce. For more read Jill Treanor's story.

1.46pm BST

US data disappoints

It's a bad number for unemployment. The number of people who applied for benefits jumped by 32,000 to 360,000 in the week ended May 11. That's the fastest pace for new benefit claims in six months.

Economists surveyed by MarketWatch had expected claims to rise to a seasonally adjusted 330,000 from a revised 328,000 in the prior week.

A Labor official told MartketWatch there was nothing unusual in the report and "there was no evidence that reductions in federal spending under a law known as the sequester contributed to the spike".

Meanwhile inflation came in at 1.1%, which is the largest drop since 2008 and the financial crash. it will certainly give Fed chief Ben Bernanke plenty of scope for unconventional monetary policy over the coming months.

See a full report on Reuters

1.15pm BST

EU Referendum bill to get an airing

Stockton South MP James Wharton who came top of the annual ballot of MPs to scoop the chance to put forward EU referendum legislation to take effect in 2017.
Stockton South MP James Wharton who came top of the annual ballot of MPs to scoop the chance to put forward EU referendum legislation to take effect in 2017. Photograph: Philip Toscano/PA

More on the EU referendum bill. A Conservative backbencher, James Wharton, has accepted the challenge of introducing a bill paving the way for a referendum on the UK's EU membership. He gained the top slot in a list of MPs able to table private member's bills and readily accepted calls to champion a referendum. He will, says the BBC, "have full Tory support to bring forward a bill outlining the terms of a referendum to be held by 2017".

Downing Street said Mr Cameron was "very pleased" and would ensure the bill was given "the full support of the Conservative Party". See Andrew Sparrow's blog for more details

12.24pm BST

Lloyds share price soars

Antonio Horta-Osorio back in 2010 - he hasn't aged much and is smiling these days after returning the bank to more profitable ways.
Antonio Horta-Osorio back in 2010 – he hasn’t aged much and is smiling these days after returning the bank to more profitable ways. Photograph: AFP/Getty Images

The value of Lloyds Banking Group, which everyone will remember disastrously absorbed HBoS at the height of the banking disaster and is now 39% owned by the taxpayer, is on a bounce after boss Antonio Horta-Osorio said the bank was profitable again.

Shares have jumped and now nestle just below the 61p level that triggers Mr Horta-Osorio's generous bonus package. There is controversy after the government arbitrarily agreed to set the 61p level, justifying it with a piece of analysisn that says it was the average price of Lloyds shares when it crashed. However, the taxpayer paid 73p for the shares and many argue we should only celebrate when that level is reached.

Eurocrats will be watching developments in the UK because there are still many bust banks across the continent in need of extra funds from somewhere. Some analysts estimate that Spanish banks still need €200bn. Lenders may have recognised many of their debts on empty property developments, but have done little to recognise the debts on their distressed mortgage lending.

11.44am BST

Schäuble speaks in Berlin

German finance minister Wolfgang Schaeuble (on the left) and prime minister of Luxemburg Jean-Claude Juncker (R)  take part in a panel discussion during the Europe forum in Berlin.
German finance minister Wolfgang Schäuble (on the left) and prime minister of Luxemburg Jean-Claude Juncker take part in a panel discussion during the Europe forum in Berlin. Photograph: AFP/Getty Images

The German finance minister Wolfgang Schäuble is talking and repeating his misgivings about central banks printing money. What everyone should remember about the loveable Mr Schäuble is that he is a humble lawyer and politician who is obsessed by the German obsession with hyper-inflation. His heyday was negotiating German re-unification. Its been downhill ever since monetary unification, which hasn't worked so well.

Obviously, he is not a fan of Japan's latest fiscal and monetary moves.

Updated at 2.02pm BST

11.33am BST

More eurozone inflation details

To get the full picture on eurozone inflation there is always the eurostat website page with its country by country breakdown.

As Faisal Islam points out Greece is suffering badly …

Updated at 11.34am BST

11.06am BST

Austerity Kills

When I talk to eurocrats they will often spout the usual guff about the worst being behind the euro; that it will hang together and everything, everywhere is improving.

But a new book emphasises just how out of touch ambassadors, Brussels officials and government policymakers can become when they stare for too long at the macro economic figures.

My colleague John Henley has written about David Stuckler and Sanjay Basu's book The Body Economic about how austerity kills. I won't recount all the grim figures on health and happiness here, suffice it to say, a cosy Brussels salary and pension is the best insulation one can have from real life.

Updated at 11.29am BST

10.49am BST

Eurozone inflation fall confirmed, imports dive

Inflation in the eurozone was confirmed by Eurostat at 1.2% for April. More interestingly was the trade figures which showed a 10% fall in imports. This stark illustration of the shocking fall in demand across the 17 member currency zone follows figures earlier this month showing that German and Italian consumers combined could bring themselves to buy only as many cars as the relatively more bouyant UK consumer. There was no increase in exports.

As Reuters reports, the 10% fall in imports had one silver lining – that the eurozone's international trade balance for March rose to €22.9bn.

10.32am BST

Maybe Germany isn’t top dog really

In addition, while I'm discussing/ranting about Germany, the almost fanatical obsession with productivity, which was only knocked off course during the 1990s by unification with the east and the associated costs, is one of the main reasons the UK stayed out of the euro.

How can anyone compete with the Germans. The minute you up your game, they move up a gear. There are no sacrifices they won't make to be the most powerful economy. The UK understood this truth of the modern era.

That said, the country's low birth rate could be construed as a massive vote of no confidence by the country's families, and women in particular, on the German way of life.

Updated at 10.39am BST

10.26am BST

Why is Germany top dog?

A very interesting article on CiF today by Martin Kettle on Germany and why it's better than the UK. Can't agree myself. When he says they don't obsess about immigration in the way we do, I think he must be talking to the wrong people.

There are plenty of government economists in Berlin who think immigration is the only answer to a declining population, but know that to even mention it will be to stir huge protests and resentment.

Also they discuss education like the Chinese, with a sense of panic that schools and colleges are merely a factory training ground when they need to generate new ideas and be creative. No government has the right answers and everyone is panicked

Updated at 10.39am BST

10.16am BST

There some action today in the ongoing battle for the heart and soul of the Tory party as the implications of the vote against the Queen's speech filters through both houses of parliament. A Tory MP has won the ballot for private member's bills and is going to come under pressure to adopt the EU referendum bill as his own. Stockton South MP James Wharton is the Tory in question. Regular tweeter Douglas Carswell MP, a free marketeer and europhobe, is cock-a-hoop. More details can be found on Andrew Sparrow's politics blog

10.06am BST

Will Japan’s growth bring on tax rises

V Phani Kumar at Dow Jones MarketWatch has written an interesting blog about the prospect of tax rises next year should the recent growth spurt prove to have some legs. It certainly true that Tokyo needs to hike its equivalent of VAT from 5% to 10% and probably beyond, but not until consumer confidence is re-established.

Updated at 10.40am BST

9.40am BST

More on Japan’s soaring GDP

Markit, the financial data providers, have published a handy chart showing, it says, that the Japanese recovery has some momentum going into Q2. It tweeted the chart and then followed it with figures showing that Tokyo indulges in mega revisions of its GDP data. Joe Grice, chief economist at the UK's Office for National Statistics, is always chiding journalists for not loooking at the long term trend in GDP data, and maybe we need to take the same healthy scepticism to today's figures from Japan

9.03am BST

Telecoms giants enter tariff battle

Bloomberg is reporting that Nokia and Ericsson have told the EU to drop a probe into unfair subsidies for Chinese phone makers. It seems the two Scandinavian manufacturers are in favour of free trade and more importantly, fear retaliation from Beijing, where they both have big sales.

Updated at 10.40am BST

8.52am BST

An agenda, of sorts

The main items on the agenda today are….

• 09:00 (GMT) – eurozone consumer price index April (final estimate)
• 09:00 (GMT) – eurozone trade balance for March
• 12:30 (GMT) – US consumer price index, April
• 12:30 (GMT) – US building permits, April
• 12:30 (GMT) – US housing starts, April
• 12:30 (GMT) – US initial jobless claims (May 11)
• 23:50 (GMT) – Japan machine orders for March

8.38am BST

French unemployment worsens

France has suffered a further rise in unemployment, according to the National Institute of Statistics and Economic Studies. A flash estimate for the first quarter shows a decrease in payroll employment of 20,300 on the previous quarter, when payroll employment fell 44,000. Temprorary employment is expected to rise 12,000 it said, reflecting a trend across many of Europe’s indebted countries for a switch to part-time and temp employment.

Updated at 8.38am BST

8.31am BST

Could eurozone inflation fall further

At 9am GMT we are expecting eurozone inflation. Recently the consumer prices index has been sinking, putting pressure on the European Central Bank and its president Mario Draghi to ease credit conditions further. April inflation sank to 1.2% from 1.7% in March. The last time inflation was this weak was back in 2010 after falling to minus 0.5% in mid-2009.
Earlier this month the central bank cut the headline interest rate to 0.5%, matching the UK. But a further decline in price inflation will be yet another indication of weak demand and the need for a stimulus package, see Japan’s figures earlier today.

8.02am BST

Good morning

Graeme Wearden is away, so I'm in the euroblog hotseat.

Its exceptionally sunny in London today. And Tokyo, where the financial weather is usually gloomy, is enjoying some rays of sunshine.

Gross domestic product rose 0.9% from the previous quarter, which translates into an annualised 3.5% growth rate.

Let’s not get carried away, but Abenomics seems to be getting off to a flying start. After the damp squib of an economic lift that came after the 2011 tsunami, the stimulus package put together by new prime minister Shinzo Abe could be generating the kind of feelgood factor Japan needs to end two decades of virtually zero growth.

The eurozone needs to look and learn.

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